loan to buy a cafe

cafe, coffee, jebudo-2081857.jpg
>loan to buy a cafe
Posted by: veloede Feb 7 2004, 02:06 PM
Hi all,

I am looking to get a loan to purchase a cafe that also does some light food sales, but am very green when it comes to whole loan process and who to go to. The cafe in question costs around 70-80k (some leeway since seller has not been successful lately in finding buyers in the winter). I have around 30k that I’d be willing to invest comfortably, and am a homeowner; I estimate I’d need around 50k or so to comfortably handle the deal. I am a bit flexible for time, but nothing more than a month. Is there any way I can get a loan of that size within a reasonable amount of time?

Some additional details, the cafe is renting a spot so there wouldn’t be any real estate acquisition, and its income stream is fairly stable, and it has been around for 3-4 years. I don’t know if this has any bearing, but the owner also owns another restaurant (he can’t manage both now so is selling the cafe), so I would think that would help vouch for the reliability of the business.

Thanks in advance
Posted by: loanuniverse Feb 7 2004, 02:53 PM

I don’t want to discourage you, but the kind of business you are describing falls into the dreaded ”restaurant category”. This is one of the types of loans that banks do not like to give. It is widely believed in the industry that these type of businesses have the highest rate of failure. I have heard restaurateurs challenge that notion, but even if it isn’t true, the perception is there and that is all that matters.

Three things come to mind when reading your post:

First: It reminded me of a similar response I gave to someone looking for a restaurant loan. In addition, there is a link there to a site that is frequented by people in the industry. They could be a great resource to tap into. Read their forums, I found them interesting.

Second: Have you considered asking the seller for ”seller financing”? $30,000 is a sizable down payment on a purchase of that size. Use the other resources such as the equity in your house to line up operating funds for a few months. Remember it is not just the purchase price, but also being able to run it.

Finally: You mention reliability of the business…… Those type of cash businesses are particularly difficult to measure. Make sure you do your own valuation and do not rely on the sellers, who of course wants to make as much money as possible.

Hope this helps.
Author: Commercial Loan Underwriter